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Lincoln Financial Cuts Dividend To Protect Ratings

By DIANE LEVICK

October 11, 2008

Lincoln Financial Corp. slashed its dividend by nearly half to preserve capital and ratings and said Friday that it expects at least a 45 percent drop in third-quarter net profit.

The company, which has about 700 employees in Hartford, also said that its capital base is strong and that it has no current plan to raise equity capital, a move that could dilute current shareholders' ownership stake.

Lincoln's stock jumped $5.64, or 31 percent on the news, to close at $23.95 a share Friday.

"We believe our third quarter excess capital position and the action we are taking to reduce the dividend serve to defend our strong capital base and improve our overall financial flexibility while maintaining a solid dividend for our shareholders," said Dennis R. Glass, Lincoln's president and chief executive.

The Philadelphia-based company's board declared a quarterly dividend of 21 cents a share on common stock to be paid Feb. 1 to shareholders of record on Jan. 9. That's a reduction from the 41.5 cents a share paid in recent quarters.

The dividend cut will save about $50 million a quarter and reflects a commitment to protect the company's AA (very strong) ratings, Lincoln said. The company also said it is suspending repurchase of its shares for the rest of the year, after buying back about 1 million shares in the third quarter for $50 million.

Lincoln expects to report third-quarter net income Oct. 28 of $120 million to $180 million, or 50 cents to 70 cents a share. Net income in the 2007 third quarter was $329 million, or $1.21 a share.

Net income in this year's quarter will include $140 million to $160 million of net realized losses on investments, after taxes, and an accounting adjustment related to future profitability of certain products. Before those items, gross investment losses and impairments will be about $400 million.

"Even in difficult economic conditions, our core retirement and insurance businesses performed well, and we remain well-positioned to execute on our business strategy," Glass said.

Along with Lincoln, other life insurer stocks rallied Friday, including The Phoenix Cos., which rose 99 percent, or $3.21, to close at $6.46 a share after slumping steadily this week to $3.25 on Thursday.